We are often being asked by owners and captains: “What are the implications of converting a private yacht to a charter yacht?”
First, let us define what is considered “Private” and what is “Charter”.
Private yacht – A vessel that is solely for use by the yacht owner and their family/friends
Charter yacht – A vessel that can be used by the yacht owner but can be rented for use by others.
We wish it was that simple, but it’s not. So let us guide you gently through the maze of rules and regulations, and help you reach an educated decision.
Can a charter yacht become a business?
When thinking about converting a private vessel to charter, the business aspect is the first question to answer.
Let us try and answer that question in general terms, as each situation is unique.
We asked the head of a yacht management company- ‘Is a charter yacht profitable?’
In general terms, he responded, the purpose of most charter yachts is not to create profit, but to mitigate some of the annual costs associated with running a yacht.
Yacht Owner personal time Vs. Charter time
You will need on average 2-4 weeks in the high season to break even on the charter costs alone.
More charters, more money, of course. But also, less time for the owner to enjoy their yacht on their own schedule.
There is a personal decision the owner must take regarding how they views their yacht, and the ability to use it.
Costs – Short and long term
There are direct costs related to operating as a charter business.
The immediate expenses on getting the boat charter ready, going through surveys, and purchasing the necessary equipment. There is also crew cost, promotional, legal and admin costs to think about in the short term.
In the long term, most people don’t consider depreciation of value due to the heavy use of the yacht.
On top of that, an owner visit will be considered a charter and will mandate to pay VAT.
Not to be discouraged though, a successful charter program can even mitigate total annual operating costs, although quite rare
Rules and regulations – How to convert a private yacht to charter?
To attack this question, we must address 3 parameters:
- The size of the yacht
- Commercial activity zone
Size of yacht
To allow conversion of a yacht from private to charter there are several obligatory steps. The main one is undergoing a commercial survey. Here the size of the yacht (In tonnage) is important.
Yachts under 200 tons will undergo an MGN280 survey, or similar. The appropriate survey needed according to the yacht flag and place of operation might differ, but the basics are the same. Those surveys mostly focus on equipment, safety, and readiness for operation.
Yachts over 200 tons are a bit more complicated as we’re entering the realms of classifications and codes. On those yachts, the original built purpose is important. If the yacht was not built for charters, the conversion might include structural changes as well. Converting private to charter on yachts over 200 tons can prove to be very expensive. Extensive viability research will be needed to make sure it is worth it.
Flag state and activity operations
The surveys and demands will vary according to the flag state and place of operation.
There are many rules to consider. From Temporary importation with a fiscal rep; Opening a local company for taxation; Crew MLC (Maritime Labour Convention) conditions regarding contracts and terms of employment.
The rules are getting stricter and changing each year as there is a growing demand for charter yachts in the MED.
Most times you will need to work with a central agent to arrange bookings. Including legal guidance and contracts.
If you do choose to charter – you can manage your own charter program quite easily through SEAZONE.
SEAZONE CHARTER MODULE
SEAZONE created the charter module to help you manage your charters in the easiest way.
· charters calendar
· cash flow and projections
· APA, guests lists and important information kept in one place
you will find that chartering is not as complicated as you thought. The captain can easily produce professional APA reports. Owners will be always on top of things. Charterers will feel safe knowing that the yacht is managed in the best way possible.
Try using SEAZONE CHARTER MODULE – it will change everything you know about charter management.